Multi-faceted Biological Growth Continues

Biological products to protect crop health, promote growth and enhance fertility are still a single digital percentage of the $40 billion crop protection market. However, that hasn’t stopped industry participants from placing bets on continued growth. Recent acquisitions such as Becker Underwood by BASF, Pasteuria and DevGen by Syngenta, and AgraQuest and Prophyta by Bayer are only a few examples of a change in the game. That change has had an impact on those acquired, but an even bigger impact on the market segment itself.

“The biggest difference is Bayer has a totally different market reach than we ever could imagine at AgraQuest,” said Ashish Malik, vice president, global marketing, Biologics for Bayer. “Previously we depended on third-party relationships with companies like BASF as well as Bayer, but we were never fully integrated into the product positioning from a strategic perspective. Now, as part of the Bayer team, our understanding of the products and how to manage these assets, combined with our colleagues’ understanding of the market, the customer and the pests and diseases, will take our business to the broad-acre markets of corn, wheat, soybeans and cotton.”

Malik, who spent five years with AgraQuest before making the transition to Bayer, pointed to the investment Bayer is making in biologics. The division is moving to a new facility with three times the capacity, and R&D budgets have increased significantly. More important than the expanded labs is access to field stations around the world, where leads can be evaluated in field situations sooner, something simply not possible as a smaller, standalone company.

Product development has changed as well, added Malik. “Poncho/Votivo is an excellent example of integrating a chemistry with a biologic,” he said. “We were always good at science, but now we set research priorities by crop and target. We are doing thousands of trials with products at Bayer, like the strobilurins and others, looking for complementary activity. There is a lot of interest in fruit and vegetables, but also in broad-acre crops, and we are only a year or two away from some pretty aggressive launches.”

BIOLOGICAL INDUSTRY IS EXPANDING

The marketplace impact of such purchases has been significant as well. “Until five or six years ago, the leaders in the biologicals market were Japanese companies like Mitsui and Sumitomo that had been in the business for decades,” recalled Malik. “With the entry of companies like Bayer and others, the credibility of the industry has increased dramatically.”

At the same time, he added, the industry was maturing as researchers gained a better understanding of how microbes and other biological agents behaved in the field. Malik emphasized that this is the change that has had the greatest impact on growers. “We understand what makes our products work and can engineer them to make sure they work every time,” he said. “With our newer products, the cost of goods is very different from what it used to be. In the past, biologics came with a cost penalty. Today, they are on an equivalent cost basis to synthetics.”

Tim Damico, executive vice president, Certis USA, would likely second Malik’s emphasis on the importance of understanding and production improvements, all of which impact the cost structure of products as well as quality control.

“Due to fermentation enhancement, we are putting out a more potent product at a lower cost that will appeal to the broad-acre markets of corn, cotton and beans,” he said.

ACQUISITIONS FUEL SEGMENT’S GROWTH

Certis started out as Thermo Trilogy with the 1996 acquisition of neem technologies from W.R. Grace. The company’s portfolio grew over the next several years through acquisitions until it was acquired by Mitsui & Co. in 2001, and renamed Certis USA. Steady sales and portfolio growth in biopesticides has been matched with strong financial performance, as well.

“The bio business has been growing in low double digits annually, and over the past three to five years we are trending at or above that,” said Damico.

The growth and expanded opportunity is changing how Certis, a leading manufacturer and distributor in EMD CropBioScience had been in the legume seed inoculant business for more than a century. The high value markets, approaches the broad-acre market.

“We are using strategic partnership licensing and distribution agreements to address broad-acre opportunities, but also expanding our sales team for wider geographic coverage.” he said.

Novozymes BioAg is one of the oldest, and in other ways one of the newer, companies in the bio business. Started in Denmark with the development of a way to extract insulin from the pancreas and eventually enzymes, it acquired EMD Crop BioScience in 2010.

Novozymes BioAg group now claims more than 50 products in biofertility, biocontrol and bioyield enhancers.

Acquisitions continued with the purchases of Natural Industries in 2012 and TJ Technology this past summer. Natural Industries strengthened the group’s portfolio in specialty crops, but also has biofungicide and bioinsecticide products with potential in broad-acre markets. TJ Technology added to the group’s bioyield enhancement product lineup with QuickRoots for a range of broad-acre crops including corn, wheat and soybeans.

Charlie Hampton, North American marketing manager, Novozymes BioAg, said one of the benefits of such acquisitions is the investment needed to bring new products to the market can limit smaller companies’ potential.

Hampton also believes broad-acre growers are becoming more aware of plant development and the role that biologicals can play in it.

“They aren’t looking for 20- to 30-bushel yield bumps, but rather consistent yield increases,” he said. “If we can produce three- to five-bushel increases consistently in soybeans and five to eight bushels in corn, growers will stay with us. Optimize has been our flagship product, enhancing production for years, and growers have stuck with it through all the market fluctuations.”

COMPANIES STILL NEED RETAILERS

Malik pointed to compatibility as another big change in how companies like Bayer and others are bringing biologicals to market. “We make certain that our products are extremely compatible with all current equipment that growers use,” he said. “We also try to ensure they can go in tank mixes with herbicides and other pesticides and that they don’t require special handling like refrigeration.”

He emphasized that this doesn’t mean all biological are held to these same standards. “Retailers need to work with the manufacturer and distributor of biological products as they would with other products, to understand how they work and what the best conditions are for them,” he said. “They need to understand each product and not assume that all biologicals work all the time. Some require special handling. While our preference is for as robust and user-friendly a product as possible, if we find a product that fits a special customer need and it requires special handling, we would consider bringing it to market.”

Malik suggested that retailers and growers not think of biologicals as a separate input category. “At the end of the day, they are just another tool. Like traits or chemicals, biologicals just add another set of capabilities to the arsenal available to growers.”